Canadian banks continue to report healthy and better-than-expected earnings, near-record profits, and capital levels at all-time highs. Yet valuation expansion for the sector has been muted so far in 2013 due to negative sentiment about the domestic housing market.

The drop came as the Real Estate Board of Greater Vancouver reported a decline in sales of 18.3% at 2,347 sales in March compared with 2,874 sales recorded in the same period a year ago.

The sales last month were the second lowest March total in Greater Vancouver since 2001 and 30.2% below the 10-year sales average for the month, the board said.

“While home sales were below what’s typical for March, we are seeing more balance between the number of sales and listings on the market in the last two months, which is having a stabilizing impact on home prices,” said Sandra Wyant, president of the Vancouver board.

The sales-to-active-listings ratio was 15.2% in Greater Vancouver, the first time the ratio was above 15% since May 2012.

In Toronto, the drop in sales did not seem to affect house prices as the average March selling price crept higher compared with a year ago.

The Toronto board says the average price was $519,879, up 3.8% from March 2012.

However, Vancouver reported that the MLS home price index composite benchmark price for all residential properties in Greater Vancouver was $593,100, down 3.9% compared with a year ago.

Home sales in Canada have been heading lower since last summer when the federal government tweaked mortgage lending rules.

In July, Finance Minister Jim Flaherty moved to tighten mortgage rules for the fourth time in as many years in order to discourage those most at risk of becoming over-leveraged.

The record high levels of consumer debt among Canadians has also raised a red flag from Bank of Canada governor Mark Carney and others who have warned that interest rates will rise at some point — raising the cost of borrowing.